Australia’s great housing paradox continues. House prices are rising, auction clearances are high and yet the number of owner-occupied housing commitments has hit a nine-year low.

At a time of record price movements (an annual 20.1% surge in the eight capital cities in the year to March, and a rise of 27.7% in Melbourne in the same time), the March figures showed seven consecutive monthly falls.

While demand for housing finance is falling, the sale and prices of houses, especially in the wealthier suburbs of  major cities, continues to rise. Prices and demand in less costly suburbs is nowhere near this level, nor are prices rising as strongly for flats, home units and townhouses.

Clearly, the interest rates late last year and in February and March are having an impact, but it’s not that dramatic an impact if you looked at the sales prices and auction clearances by themselves.

Figures today on lending finance for March from the Australian Bureau of Statistics show that the seasonally adjusted estimate for the total number of owner-occupied housing commitments fell 3.4% in March 2010. “This is the lowest level since April 2001,” the ABS said.

A total of 48,260 commitments for owner-occupied were approved in March, 1723 down on February and 6633, or about 11% lower than in June 2009 when 64,893 were approved.

Excluding refinancing of existing mortgages, the fall was even greater.

The ABS said that in trend terms, the number of owner-occupied housing commitments excluding refinancing fell 4.7% in March 2010 compared with February 2010, following a fall of 5.2% in February 2010. The seasonally adjusted series fell 4.6% in March 2010 after a fall of 2.7% in February.

“The number of finance commitments for the construction of dwellings for owner occupation fell 7.3%, seasonally adjusted, in March 2010.

The ABS said in seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell by 1.4% in March, but the value of investment housing commitments seasonally adjusted rose 3.0% in March 2010 to 6644.

“In trend terms, the number of commitments for the construction of dwellings decreased 4.6%, the number of commitments for the purchase of established dwellings fell 4.0% and the number of commitments for the purchase of new dwellings fell 3.2%

Peter Fray

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Peter Fray
Editor-in-chief of Crikey